03/18/2010 05:12 am ET Updated May 25, 2011

Senate Bill Provision Creates Private Industry Rationing: Reform Advocate

A major health care reform group is criticizing a provision in the Senate health care reform bill that would cap the cost of medical care that consumers could have on a yearly basis.

In a conversation with the Huffington Post, Richard Kirsch, national campaign manager for the pro-reform group Health Care for America Now, said that imposing limits would essentially institutionalize the rationing of care within the private health insurance industry.

"This is one more example of a way the insurance industry want to ration people's care to protect their profits," Kirsch said. "It is a total gift to the insurance industry."

The annual cap has actually been in the text of the health care legislation since the Senate Finance Committee introduced its final product. But it was given scant attention until the Associated Press reported on it on Friday. Under the language, the administration would set limits on the dollar value of medical care an insurance company could provide to a consumer; though there would no lifetime limit on dollars spent.

Negotiators on the Hill viewed this as the most reasonable compromise to a tricky debate; one that will ensure that a single costly consumer doesn't raise premiums for others. Congress could have conceivably taken three approaches: eliminate all limits, allow the status quo to persist -- in which private insurers essentially set their own limits -- or allow the government to enforce a limit that was not "unreasonable."

"One of the goals of our bill is to reduce costs to American families who are being crushed by skyrocketing health care costs," Jim Manley, a spokesman for Senate Majority Leader Harry Reid (D-Nev.) said of the decision. "We are concerned that banning all annual limits, regardless of whether services are voluntary, could lead to higher premiums. We continue to work with experts on how best to accomplish our goals of preventing insurance companies from imposing arbitrary coverage limits while providing the premium relief American families need and deserve."

Efforts to balance the need for cost-effectiveness with moral fairness have proven tough for Senate negotiators. An earlier form of health care legislation, crafted by the Senate health committee, eliminated all caps (both annual and lifetime) -- a reform that Kirsch and others support.

"The whole purpose of insurance is to spread risk among everybody," he said. "By their same logic, you shouldn't have health insurance at all. Because someone is going to cost a lot and everyone will have to pay for it."

As an example of where he thinks such a policy fails, Kirsch pointed to the hypothetical case of a patient with a costly and recurring disease. Under the Senate's plan, such a patient would be fine, provided that his or her medical care comes under a certain dollar amount each and every year. But if expensive surgery were required one year (even if little medical care was required in other years) the patient would have to make out-of-pocket payments for the coverage that exceeded the limit.

Aides on the Hill say that they included other provisions in the legislation to ensure that such developments occur irregularly, if at all. The current legislation will have subsidies to help individuals who have serious, life-threatening illnesses, as well as subsidies for those who have trouble affording coverage on their own. A push for increased investment in wellness and prevention, meanwhile, is designed to preempt costly illnesses from occurring in the first place.

One Democratic source with knowledge of the legislative compromise noted that many large employees, as well as some union-negotiated plans and state high-risk insurance pools have implemented caps already as a means to keep premiums down across the board. The source also pointed out that the Secretary of the Treasury -- which will set the limits -- would be far more generous in setting the caps than private insurers themselves.

"The language in the Senate bill leaves a lot of discretion to the Secretary of the Treasury to determine what is reasonable and unreasonable with respect to a cap," said the source. "Premiums would go through the roof if we eliminated annual limits."